Flexibility And Security In A Modern Economy

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The speed at which change occurs in our modern Australian economy diminishes the security and wellbeing of many workers.

The business community responds by calling for greater flexibility. Is it possible to deliver more flexibility to business whilst simultaneously enhancing security of the workforce?

As Treasurer and then as Prime Minister, Paul Keating did more than anyone to shape our modern Australian economy. The globally interdependent Australian economy that emerged during the Hawke/Keating era has since presented a significant challenge for social democrats.

Successive Labor governments have struggled to protect the interests of workers in an economy increasingly prone to rapid shifts from declining, to expanding sectors.

Keating believed that if you have business as well as labour, you will win. But is it possible to develop a program of policies that serve both business and labour without submitting to the shallow opportunism of third way politics? The answer to this question must be part of the modern Labor project.

In the series of interviews he conducted with Keating, Kerry O’Brien raised the issue of skilled, semi-skilled and unskilled workers who lost their jobs during the process of modernisation.

“They found a better job a week later in a growing economy,” Keating responded.

In reality, many unskilled workers never found another job again.

Economic change now occurs at an extraordinary pace. Rapid economic change suits those able to adjust their skills to suit an expanding sector of the economy.

This is not an easy thing to do. Workers who enter the workforce today possess skills that may not be applicable in ten years’ time. They are right to feel uncertain about their future.

A modern Labor platform would not be complete without an elegant and effective labour market policy. Keating did introduce the National Training Authority Act to guide workers through periods of accelerated change – but something more is required.

Australia needs an ongoing scheme that offers real financial security for our most important resource.

Such a scheme has been operating in Europe for several decades. Some Nordic and western European countries have been using a system known as ‘flexicurity’, a portmanteaux of ‘flexibility’ and ‘security’ for decades and it has been the official labour market policy of the European Union since 2007.

The ACTU released a report on this system authored by economist Grant Belchamber in 2009. Is it time to revisit this report?

Flexicurity offers generous labour market flexibility to businesses and income security for workers through generous unemployment benefits and training for displaced workers. The unemployment benefits are the sum of social security payments and released payment from the unemployment insurance.

The system is designed to facilitate a rapid return to the workplace with placing undue psychological stress on workers.

A form of flexicurity adapted to suit an Australian context would focus on a training wage - rather than generous unemployment benefits - to emphasise that the workers affected remain within a system of collective workplace organisation.

Retraining should naturally focus on the skills needed to encourage an expanding sector of the economy.

Businesses experiencing slow periods or in a phase of transition can release workers to retraining. Workers in declining sectors are able to develop a new career path without losing income security.

Those same workers could “…find better jobs, in a growing economy…” without mental anguish associated with uncertainty and diminished self-esteem associated with unemployment.

Could flexibility be applied to the Australian context? The flexicurity system in Europe is imperfect and can be improved. Its brutal elements should be acknowledged. Even with greater wages security, as it is not easy to be shifted from work to training on short notice.

A Labor Government, concerned about the consequences of unemployment and nor merely the fact of it, must equally consider the consequences of sudden displacement.

The costs of the European model of Flexicurity are also borne largely by workers and taxpayers, through unemployment insurance and social security benefits.

Should business also share some of the costs that afford them enhanced security for which they have advocated for decades?

But a well-designed active employment scheme would address a number of concerning issues. The skills of workers who are out of the workplace for an extended period diminish, whereas under a flexicurity system, skills are acquired. But this scheme is also attractive to business.

To be successful in a rapidly changing economy, businesses must pay great attention to the skills of their workforce. Businesses generally underinvest in skills acquisition when they are obliged to cover the full cost of the training up front.

The business community should welcome any opportunity, therefore, to share the burden of training in a manner that would also address their concerns about skills shortages.

It would require an ongoing commitment to cooperation between unions, business and government, enlarging the tent that was used to bring unions and government together when the Prices and Incomes Accord was negotiated.

But the benefits to Labor of ongoing dialogue between these parties would be great, for “…if you have business, and you have labour, you win.


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